The European Commission has revised its March 2018 guidance on the legal repercussions of the United Kingdom's withdrawal from the European Union for European works councils, including the implications of a no-deal Brexit.
The European Commission's notice to stakeholders does not have any formal legal status, but will be persuasive in any dispute. It confirms the analysis in a recent article on the impact of Brexit on European works councils currently governed by UK law. In summary, the European Commission considers that a no-deal Brexit would have the following consequences:
- The EU European Works Council Directive will cease to apply to the United Kingdom. If a corporate group will cease to have 1,000 employees in EU member states then, even if a European works council is already established, the group will cease to be subject to the directive (although it may continue to exist under national law).
- UK employees may continue to be represented on a European works council if that is provided for in the European works council agreement.
- If a corporate group's central management or representative agent is currently in the United Kingdom, the role of central management will be transferred to an EU member state. Unless central management's ultimate parent company has designated a new representative agent in a member state, this role will be assumed by the establishment or group undertaking employing the greatest number of employees in a member state. This responsibility is transferred automatically and immediately as of the UK withdrawal date.
- The law applicable to a European works council agreement is that of the member state where the central management, deemed central management or central management's representative agent is situated in the European Union. So, where UK law has applied to an existing European works council, as of the withdrawal date the law of a remaining member state will automatically and immediately apply. This is to ensure that the rights of employees in remaining member states remain enforceable.
The European Commission's notice therefore confirms that, even in the event of a no-deal Brexit, European works councils will continue to exist and operate to ensure that the rights of employees in remaining EU member states are not prejudiced.
Management should proactively designate a new representative agent in a remaining EU member state, in order to avoid governing law based solely on headcount numbers on an arbitrary date in the future.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.